5 ENTRY Techniques using non Horizontal support and resistance

5.1 Trendlines

Trendlines merely join turning points in the price’s path to create Non Horizontal support (if below the price) and Non Horizontal Resistance if above the price.

When the price approaches a trendline it is either going to break through the trendline or bounce off it.

Factors that affect the strength of a trendline breakout (in other words how strong will the breakout be) are:-

• The time covered by the trendline – a 4 hour trendline is not a strong as a 5 day trendline
• The angle of the trendline – the steeper the angle the less reliable the breakout will be
• The number of times is has already been tested – if the price has bounced 5 to 6 times on the same trendline it will produce a stronger breakout.
• The breakout will be stronger if supported by a price formation such as a double top, head and shoulders, channel etc.

The bigger the number of breakout signals supporting a breakout entry, the more likely that it will succeed. Some of these could be.

• Price formations supporting the breakout
• Divergences on the momentum indicator
• Trendline violations on the momentum indicator
• Reversal candle formations
• Moving Average crossover already happened

The approach to entering trendline violations is simple. When the price approaches a trendline and there is considerable evidence that the momentum will push the price through the trendline, enter when the price violates the trendline.

5.2 Channel trading

Channels can be horizontal or non horizontal. Non Horizontal channels are identified by parallel trendline lines (See the daily chart below). Horizontal channels are when the lines are more or less horizontal (see the 4 hour chart below)

Below is an example of the GBPUSD which has channels on all its timeframes

You only need 3 anchor points to establish a potential channel. 1, 2 and 3 are these points in the chart to the left.

Once an extended line is drawn between 1 and 3 a parallel line is added at point 2 and you have a channel.

In this example points 4 and 5 become predictable channel bounce points. Sooner or later a new channel is formed when the price breaks out of the current one.

Entering when using a channel trading approach is easy. Place pending orders for a buy entry at the bottom of the channels and place a sell pending order at the top of the channel.

5.3 Moving Average crossover

We use the 3 moving average shifted by 3 periods.

The moving average is a tool that you can use to separate the buy zone from the sell zone.

When the price is above the moving average it is in the buy zone and when it is below it is in the sell zone.

When the price moves over the moving average from one zone to the next it creates a potential buy or sell signal.

We have however found that these crossovers do not make the best entry signals and therefore would only use the signal to confirm another signal.

From the chart on the right you can also see that the RSI 50% crossover signal occurs at almost exactly at the same time as the moving average crossover signal.

You simply ENTER a transaction when the price crosses over the moving average line and closes on the other side of it. Crossovers below the moving averages are sell transactions and crossovers above the moving average are but transactions.